EC120 Chapter Notes - Chapter 13: Marginal Product, Marginal Cost, Production Function
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Total revenue: the amount a irm receives for the sale of its output. Total cost: the market value of the inputs a irm uses in production, the amount a irm pays to buy inputs. Proit: a irm"s total revenue minus its total cost. Explicit costs: input costs that require an outlay of money by the irm. Example: a cookie company paying for lour, for chocolates chips . Implicit costs: input costs that do not require an outlay of money by the irm. Example: the cookie company manager is a skilled programmer and could earn /hour programming, for every hour working for the company they give up (opportunity cost) Note: accounting deals with the explicit costs of the company because it focuses on keeping track of the money that lows into and out of irms! Economic proit: total revenue minus total cost, including both implicit and explicit costs. Accounting proit: total revenue minus total explicit cost.
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